2002 (5) TMI 832 - HC - VAT and Sales Tax

Summary

Issues:
Challenge to collection of sales tax by State of Assam on food-stuff sold through departmental canteen on no-profit/no-loss basis by Union of India.

Analysis:
The Union of India filed an application under Article 226 challenging the collection of sales tax by the State of Assam on food-stuff sold through departmental canteens. The petitioner argued that as per Article 285(1) of the Constitution of India, the State has no authority to levy sales tax on the property of the Union of India.

The petitioner, running departmental canteens in Railway Stations in Assam, contended that they serve railway employees and passengers on a no-profit/no-loss basis. The State of Assam collected sales tax from the petitioner, leading to the legal dispute. The petitioner relied on a decision of the Punjab High Court which held that sales by the Government are immune from taxation under any State law.

In the case of Union of India v. State of Punjab, the Punjab High Court ruled that the Union of India, not being a dealer, was not liable to pay sales tax on its sales turnover. However, this decision was challenged before the apex Court in State of Punjab v. Union of India. The apex Court upheld that sales by the railways were immune from taxation under State law as per Article 285(1) of the Constitution.

Based on the apex Court's decision, it was held that the petitioner, Union of India, is not liable to pay sales tax on the sale of food-stuff through its departmental canteens. Consequently, the State of Assam was not entitled to collect tax on such sales. The writ petition was allowed, directing the respondents not to levy sales tax on food-stuff sold through departmental catering units. Additionally, the judgment ordered the refund of the amount already paid by the petitioner.

In conclusion, the High Court ruled in favor of the Union of India, emphasizing the immunity of sales by the Government from taxation under State laws as per Article 285(1) of the Constitution.